The AI startup Manus, which was once treated as one of the great disruptors capable of challenging Silicon Valley, has become an example of everything that can go wrong for Chinese entrepreneurs. Reason: Beijing authorities ordered Meta to undo the company’s US$2 billion purchase.
With a dry, 54-character order from the government’s main planning body, China made it clear that it is willing to block, at any cost, the transfer of sensitive technology to geopolitical rivals. The measure comes after the government restricted companies such as ByteDance and Moonshot AI from receiving American capital without official approval, in addition to tightening the crackdown on Chinese companies with structures abroad that plan to go public in Hong Kong.
In practice, the message ushers in a much more uncertain phase for the AI sector, which had been expanding at high speed in the country. Behind the scenes, the movement is already intense: founders, financiers and companies are racing to avoid becoming “the next Manus” — the startup created by Chinese that moved its headquarters to Singapore to access global capital. There are companies reviewing their portfolio, redesigning corporate structures and even building real “walls” between operations in China and the USA.
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“As of today, ‘the Manus model’ is officially dead”, summarizes Dermot McGrath, founder of ZenGen Labs, a Shanghai consultancy that serves technology startups. “Chinese teams played above the divide in AI and produced a string of unicorns. Policymakers came to see the Manus maneuver as a roadmap that could put the crown jewels of the innovation ecosystem at risk in the technology of the decade.”
Beijing was especially bothered by two things: the speed with which Meta closed the deal and the fact that an “agentic AI” technology ended up in one of the most valuable giants in Silicon Valley.
The backlash against Manus — which comes just weeks before President Xi Jinping meets Donald Trump — exposes China’s ambition to surpass the US in technological and economic power. Meta preferred not to comment.
For a while, Manus was seen as a roadmap to success for Chinese AI aspirants: a viral company created by three local founders, which rose to prominence in the United States before being purchased by Meta. But even as startups like DeepSeek attracted domestic capital, admiration for Manus quickly soured. Founders and venture capital funds now need to redesign, from scratch, fundraising plans and corporate structures to adapt to the new regulatory environment.
Startups that planned to follow the path of MiniMax Group and Zhipu towards the Hong Kong Stock Exchange are now looking for their investors so as not to be trapped in an “IPO limbo”, say sources heard by Bloomberg. At least three investment houses are discussing with the founders whether it is worth dismantling offshore structures — the famous “red-chips”, which until recently were almost synonymous with an obligatory step towards a listing.
According to these people, regulators have instructed AI and robotics companies — including DeepSeek’s rival StepFun — to undo these structures so they can debut on the city’s stock exchange.
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For companies operating in both China and the US, the Manus case is even more worrying. Billionaire Chen Tianqiao, a pioneer of online games in the country, told Bloomberg that he has already implemented protocols to prohibit sharing of information or code across borders, in addition to reducing the movement of people, data and assets between bases to a minimum.
“The Manus episode is a huge warning for every entrepreneur operating in more than one country,” Chen said. “With the regulatory environment becoming more complicated in all regions, founders, advisors and law firms need to be much more careful and rigorous with compliance.”
Among smaller startups, the reading is that the path to global growth has become so narrow that some are considering being born outside of China — in Singapore or Silicon Valley —, precisely to “dilute” their Chinese origin. The idea would be to keep engineers in China only as a low-cost “back office”, to avoid running into regulatory traps like Manus.
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All of this happens amid rising geopolitical tensions. The US has been discouraging American capital from investing in Chinese technology for years, especially in sensitive areas such as AI. More recently, China-based managers have begun using “shadow fund” structures, allowing American investors to gain exposure to less sensitive sectors while staying out of no-go areas.
ZhenFund, one of Manus’ investors, set up a specific vehicle to receive American investors and another for the rest of the world in its new fund, which seeks to raise around US$300 million.
“Packaging a startup so that it becomes an attractive target for American buyers has become an industry in itself,” says Jenny Xiao, a partner at Leonis Capital in San Francisco, which invests in early-stage AI startups. “Manus was the first to actually execute this playbook.”
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In any case, cases like DeepSeek and Manus itself have made it clear to investors that Chinese AI is not something that can be ignored. DeepSeek has raised its first external round and attracted interest from Tencent and Alibaba, while other newcomers such as Moonshot are closing in on an IPO.
The technology behind Manus’ viral AI agent was created by the founders when they were still living in China. Launched in 2025, the agent became famous for its ability to automate complex tasks, such as analyzing stocks or writing commercial proposals.
A month later, parent company Butterfly Effect raised $75 million in a round led by Silicon Valley’s Benchmark at a $500 million valuation. The inflow of this capital triggered an alert at the US Treasury, which opened an investigation into possible violations of investment rules in sensitive technologies. Manus received questions from US officials, such as whether members of the Chinese Communist Party had ever visited its offices or whether the AI agent used Chinese base models.
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The Treasury and Manus did not respond to requests for comment.
“China’s use of threats and coercive exit bans against Meta and its employees is consistent with the Chinese government’s long history of interference in normal business transactions,” White House spokesman Kush Desai said in a statement.
The investigation ended up halting Manus’ plan to internally train a smaller model using Chinese open source offerings. With costs exploding, the company ended up looking for a buyer.
When Manus moved its China-based team to Singapore in July, Beijing raised alarm bells. Authorities accepted the move under the condition that the company would maintain close ties with the domestic ecosystem. This understanding, sources say, collapsed with the announcement of the sale to Meta.
In December, Meta revealed the purchase of Manus — a rare bet on a team born in China — days after the startup announced that it had surpassed US$100 million in annualized revenue. At that time, it was unclear whether Beijing would try to interfere in a deal that, in theory, took place outside its jurisdiction.
“Manus may not be a strategic technology today,” says Vey-Sern Ling, director of Union Bancaire Privée. “But it is only a matter of time before Chinese startups emerge with sensitive technologies, and this case will serve as a warning for everyone to tread much more carefully.”
Manus’ trajectory was accelerated: from product launch to agreement with Meta, less than a year passed. The company’s “all-in” mentality was reflected in a poster hanging in the Beijing office before the move to Singapore: “Go big or die. There are no other options.” (loosely translated: “Win in a big way or die. There is no other way.”)
© 2026 Bloomberg L.P.
